With Visa's new 2010 World Cup spot coming out, it might be a nice time to revisit the tussle that went down between Visa, Mastercard and FIFA on the last go-around of FIFA's World Cup sponsorship renewal. Visa's 2010 World Cup sponsorship will be its first in the financial services category (Mastercard was an official sponsor from 1990-2006). The transition was anything, but smooth. It's complicated, settle in.

In April 2007, MasterCard sued FIFA for its failure to honor first rights of refusal on its World Cup sponsorship deal after it had awarded the exclusive Financial Services sponsorship to VISA. It argued that MasterCard had the right of first refusal to sponsor the 2010 and 2014 World Cups but was not given the opportunity to do so. According to the complaint, Mastercard paid a premium in its last rights deal to put a "first right of refusal" clause into the contract that would guarantee the option for 2010 and 2014. In 2006 however, FIFA officials including then-Director of Marketing and TV, Jerome Valcke, decided, like many other properties have in recent years, that it wanted fewer, but more lucrative sponsorship deals.

To FIFA, that meant reducing the number of FIFA sponsors from 15 to 6, broadening Mastercard's category to include all of financial services (beyond credit cards) and significantly increasing both the price and length of the sponsorship. Restructuring of FIFA's sponsorship structure was muddied by the ISL (FIFA's previous sales agency) blow-up, another key component to the case which you can read about below, but that's a discussion for another day. Even with the shift in strategy however, Mastercard was still guaranteed a ninety day window to consider the option to renew (see for yourself in the MC/FIFA sponsorship contract). Mastercard's claim was that FIFA infringed on this window by soliciting sponsorship from Visa.

FIFA's interpretation of the 2002 agreement, on the otherhand, was that it did not restrict it "from approaching or making presentations to third
parties prior to a Mastercard decision." Head of FIFA’s Commercial Legal Department, Tom Houseman said in testimony that FIFA was “free to offer, but not free to sell," but when asked what would happen if a third party that had been offered the sponsorship had proceeded to accept prior to MasterCard exercised its rights under , Mr. Houseman responded: “We might have had a problem." The problem would come in the form of Mastercard's lawsuit in April of 2006.

For anyone seriously interested in sponsorship, spending an hour to read through Mastercard's complaint below, or at least the judgement, would be a good investment.

While Valcke negotiated with MasterCard and eventually received a signed contract from the company for the sponsorship terms FIFA was seeking (i.e. $180 million in cash over eight-years), parallel discussions with Visa led FIFA to ask Visa to top Mastercard's signed contract by roughly $30 million. Mastercard's contract was never countersigned by FIFA, Visa's was on April 3rd. However, even that was disputed in court. When both Visa and FIFA were asked to produce the same contract in court, Visa's version was dated on April 6th while FIFA's was dated April 3rd. FIFA had informed MasterCard that it already had an agreement with Visa on April 5th, but according to those records the deal was not yet signed.

On Dec. 7, 2006, U.S. district judge, Loretta Preska sided with MasterCard in its US federal lawsuit against FIFA. The judge issued a ruling stating that FIFA had breached the contract and that MasterCard was entitled to sponsor the next two World Cups, which eventually resulted in a $90 million settlement awarded to Mastercard. The judge also ripped FIFA officials for repeatedly lying to both MasterCard and VISA during the negotiations for lying repeatedly to MasterCard by not informing the company of its conversations with Visa, and lying to Visa by denying that MasterCard had first-refusal rights. In the words of Preska:

FIFA’s negotiators lied repeatedly to MasterCard, including when they
assured MasterCard that, consistently with MasterCard’s first right to acquire,
FIFA would not sign a deal for the post-2006 sponsorship rights with anyone else
unless it could not reach agreement with MasterCard.

FIFA’s negotiators lied to VISA when they repeatedly responded to the
direct question of whether MasterCard had any incumbency rights by assuring
VISA that MasterCard did not.

FIFA’s negotiators provided VISA with blow-by-blow descriptions of the
status of the FIFA-MasterCard negotiations while concealing from its long-time
partner MasterCard both the fact of the FIFA-VISA negotiations as well as the
status of those negotiations – an action FIFA’s president admitted would not be
“fair play.”

Even more glaring from the judge's decision was the extent to which Judge Preska said FIFA went to cover up their actions. Again, from the judgement:

Their internal emails discuss the “different excuses to give to MasterCard as to why the
deal wasn’t done with them,” “how we (as FIFA) can still be seen as having at
least some business ethics” and how to “make the whole f***-up look better for
FIFA.” They ultimately confessed, however, that “[I]t’s clear somebody has it in
for MC.”

Valcke, Houseman, and two others were fired by FIFA days after the judge's verdict. At the time, FIFA issued a statement saying "Even though the judgment has proved to be very biased in favor of MasterCard, the fact cannot be overlooked that FIFA's negotiations breached its business principles. FIFA cannot possibly accept such conduct among its own employees."

Some day this will make a great JD/MBA case study if it hasn't already. In the meantime, revenge is an ambush best served in South Africa?